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Large debt financing: syndicated loans versus corporate bonds

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Author Info
Yener Altunbaş () (Bangor Business School, Bangor University, Bangor, Gwynedd, LL57 2DG, United Kingdom.)
Alper Kara () (Loughborough University Business School, LE113TU, United Kingdom.)
David Marqués-Ibáñez () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)

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Abstract

Following the introduction of the euro, the markets for large debt financing experienced a historical expansion. We investigate the financial factors behind the issuance of syndicated loans for an extensive sample of euro area non-financial corporations. For the first time we compare these factors to those of its major competitor: the corporate bond market. We find that large firms, with greater financial leverage, more (verifiable) profits and higher liquidation values tend to prefer syndicated loans. In contrast, firms with larger levels of short-term debt and those perceived by markets as having more growth opportunities favour financing through corporate bonds. JEL Classification: D40, F30, G21.

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Paper provided by European Central Bank in its series Working Paper Series with number 1028.

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Length: 37 pages
Date of creation: Mar 2009
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Handle: RePEc:ecb:ecbwps:20091028

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Keywords: syndicated loans; corporate bonds; debt choice; the euro.;

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